New deal for retail, sops to continue for EOUs

FOREIGN TRADE POLICY 2005

EPCG scheme to be tweaked to help make India shopping hub.

The annual supplement to the Foreign Trade Policy is expected to contain sops for the retail sector and the agriculture sector, particularly poultry, and simplification of procedures for the export-oriented units.

"The Export Promotion Capital Goods (EPCG) scheme would be liberalised and extended to include the retail sector in order to make India a shopping hub," a commerce department official told Business Standard.

The commerce and industry ministry is already working on a proposal to allow foreign direct investment in retail. Officials said continued emphasis of employment-intensive sectors, reduction in transaction costs through procedural simplification and furthering electronic data initiatives would be key focus of the annual supplement.

While the proposal to extend the EPCG scheme to retail is still being fine-tuned, officials said the onus of the export obligation under the scheme would be on the retailer.

"There would have to be some kind of a back-to-back agreement between the retailers and the builders under which the retailer is allowed to import capital goods for use in the retail complex under the scheme," an official said.

The EPCG scheme allows import of capital goods for pre-production, production and post-production at 5 per cent Customs duty, subject to an export obligation equal to eight times of the duty saved on capital goods imported under the scheme to be fulfilled over a period of eight years.

For export of agricultural products and their value-added variants, capital goods are allowed to be imported duty free.

Another proposal under consideration was relaxation of the export obligation norms for select sectors such as agriculture and small-scale industry.

The Vishesh Krishi Upaj Yojana, announced last year, is also expected to be expanded to include the poultry sector.

The scheme is presently restricted to fruits, vegetables, flowers and minor forest produce.

Under the scheme, exporters are entitled to duty credit scrip equal to 5 per cent of the FOB (free on board) value of exports for each licensing year commencing from April 2004.

Officials said while exemptions from duties such as service tax were unlikely for the export oriented units (EOUs), the ministry was working on simplifying procedures such as transition procedures from domestic tariff area to EOUs as also procedures covering movement of material between the two areas.